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Could a crackdown on no win, no fee make claims for whiplash harder?
Could a crackdown on no win, no fee make claims for whiplash harder?
Justice Secretary Kenneth Clarke has announced a series of proposed crackdowns to the ‘no-win, no-fee’ legal system. His concerns are that “the fear of excess costs sometimes forces defendants to settle even when they know they are in the right.” However, the Shadow Justice Secretary Sadiq Khan believes that such a move would have an adverse effect on those with lower incomes who are also seeking justice.
By changing the rules of the ‘no-win, no-fee’ system, Mr. Clarke is aiming to cut the cost of car insurance premiums by around 10%. According to a report by the AA, these costs rose by around 33% in 2020 and, if the current system remains unchallenged, are likely to rise by a further 20% in 2011. Without doubt, many of the lawyers in question have their part to play in these price hikes.
No win, no fee
As the current system stands, ‘no-win, no-fee’ lawyers are given a large financial incentive in the form of a success fee, which is paid to them each time they win a case. This fee is awarded regardless of the size of the claimant’s compensation, providing a strong motive to take on even the smallest of claims. According to the Association of British Insurers (ABI), the average legal bill adds around £2100 to the cost of each claim. In addition, the incentive for the public is equally strong as, under the ‘no-win, no-fee’ system, they incur no costs themselves – even if the claim is thrown out of court.
The result of these factors and the revelation by the ABI that the average payout after a road accident stands at around £2340 (excluding lawyers’ fees) is that the motorist bears the brunt to the tune of around £100 per year.
However Nicolas Jervis, managing director of personal injury claims specialists 1stClaims, believes that Kenneth Clarke’s proposals could have a further and possibly negative effect. He says: “There is no denying that the ‘no-win, no-fee’ system has its flaws and, like every other legal system, is open to abuse. Possibly because of the recent recession, certain claims such as whiplash, are seen by some as an easy way to make money. The problem for the rest of us is that we end up paying for fraudsters’ successes in increased premiums,” he explains.
Paying up front
This is partly why he believes that the Government has targeted ‘no-win, no-fee’ lawyers. However, removing or restricting the system cuts off an avenue of justice that otherwise might not be available to members of the public – such as those in low-income jobs. “On top of that, by reducing success fees, lawyers may well be deterred from taking on claims that have little or marginal evidence to support them. Claimants may well find themselves being asked for a large sum up front to compensate for the loss of these fees,” adds Nicolas.
It seems, then, that the heart of the problem may not lie with the system as a whole, but with a few unscrupulous lawyers who are more interested in the success fee than achieving justice and a few unscrupulous motorists who flout the Law for their own financial gain.
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